Jul 19, 2017
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“Two deductions may be available to individuals.”
Two deductions may be available to individuals employed as tradespersons and/or apprentice mechanics in respect of eligible tools acquired and used in employment.
Tradespersons’ Tools Deduction:
A tradesperson may deduct an amount in respect of “eligible tools” acquired for use in his or her employment, as required by his or her employer. The Canada Revenue Agency views a tradesperson to be a person engaged in an occupation that demands a certain level of skill, whether or not the person is a registered tradesperson.
The amount deductible is the lesser of:
i) $500, and
ii) the cost of eligible tools acquired in the year minus $1,000.
Accordingly, a tradesperson must acquire at least $1,000 of eligible tools in the year but the maximum deduction is $500 even if eligible tools in excess of $1,500 are acquired.
An eligible tool is one that:
a) is acquired for use in the tradesperson’s employment,
b) has not been used for any purpose before being acquired,
c) is certified by the tradesperson’s employer (on Form T2200) to be required as a condition of the tradesperson’s employment, and
d) is not an electronic communication device, or electronic data processing equipment (certain exceptions apply).
Apprentice Mechanics’ Tool Costs:
In addition to the tradespersons’ tools deduction, an apprentice mechanic may also deduct an amount in respect of eligible tools acquired for use in employment as an apprentice mechanic. To qualify, an individual must be employed as an apprentice mechanic and be registered in a Red Seal program (see www.red-seal.ca) leading to designation as a mechanic.
Generally, the deduction is available to the extent that the cost of eligible tools acquired exceeds $1,500 in a year. The amount deductible is the cost of eligible tools acquired minus 5% of the individual’s income from employment as an apprentice mechanic (including grants).
TAX TIP OF THE WEEK is provided as a free service to clients and friends of the Tax Specialist Group member firms. The Tax Specialist Group is a national affiliation of firms who specialize in providing tax consulting services to other professionals, businesses and high net worth individuals on Canadian and international tax matters and tax disputes.
The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.